Five Best Practices for Successful Procurement in 2021

05: Contract Management

Many organisations consider there to be significant barriers when managing contracts, and it can be a very costly task if not given the proper consideration. Many organisations say they don’t currently follow a defined process for contract management. Some ways to make contract management more effective include:

• Storing all documents in a cloud database.
• A scalable, customisable interface that can be tailored to business requirements.
• Automated notifications, including automated alerts for contract milestones, renewals and renegotiation opportunities.
• Performance monitoring, including delivery time tracking, product quality, pricing and adherence to purchasing terms and conditions.

04: Optimise Inventory

The average inventory holding cost is between 20% to 30%. Understanding the real cost of holding inventory allows companies to can optimise stock. Improved management of inventory will limit the amount of capital lost, as most products will have a lifespan of some sort. Some of the questions that organisations can ask to get a better idea of their current utilisation include:

• What is the ratio of operating inventory in terms of safety, replenishment and excess stock?
• Is the procurement team over-purchasing or under-purchasing products or services? 
• What is the best frequency of purchases?

03: Supplier Engagement

As simple as it may seem to communicate, onboard and make payments to a supplier, which, if done manually, can take away time from other activities within the company. By using suitable supplier management tools, companies can automate and manage their digital procurement processes better. Suppliers can improve supplier engagement by: 

• Creating win-win situations.
• Treating suppliers as strategic partners.
• Using KPIs to monitor supplier performance.
• Communicating and collaborating with vendors.

02: Spend Transparency

Effective use of data can be very beneficial for internal spend management and promotes accountability within an organisation. It can also improve procurement cost efficiency and ensure that suppliers are managed in compliance with their contractual agreements. To ensure spend transparency, organisations can:

• Define and implement procurement policies properly.
• Monitor and document the whole procurement process.
• Identify and manage a list of approved suppliers.
• Establish specific procurement contracts.
• Conduct frequent audits.

01: Utilise Digital Tools

As purchasing costs are on the rise, businesses are focusing on procurement management strategies in an effort to reduce their spending. If companies wish to keep up in 2021, they will need to understand the importance of digital transformation to implement these strategies.